2013 (10) TMI 119 - HC - Companies Law

Winding up Petition u/s 433(f) r.w. Section 439(c) of the Companies Act The petitioner was denied access to the company s records, factory etc. and was made non-functional Held that - Clause (f) of section 433 uses the expression just and equitable - This expression was not to be construed ejusdem generis with the other clauses of the section, as held by the Supreme Court in Rajamundry Electric Supply Corporation Ltd. v. A. Nageswara Rao 1955 (12) TMI 21 - SUPREME COURT OF INDIA - The facts alleged in the petition and elaborated prima facie show that this was a case to which the provisions of Sections 397-398 may be attracted - It was well-settled that winding-up proceedings have to be used as a last resort - In a case such as the present one, there were preventive provisions in the Act safeguarding against oppression and mismanagement - If some other remedy was available to the petitioner, that should be exhausted first - This petition was thus premature. The petitioner draws the attention to the accounts to show that for three continuous years the company had been incurring losses which exceed the paid-up capital - this by itself was not decisive of the question whether it was just and equitable to wind up the company - Once the differences between the directors were sorted out for which no attempt appears to have been made so far the possibility of the company reviving its operations and making profits cannot be ruled out - the winding- up petition was premature and was not maintainable Decided against Petitioner.

Summary

Issues:
Petition seeking winding up of a company under section 433(f) read with Section 439(c) of the Companies Act, 1956.

Analysis:
1. Background and Incorporation: The petitioner and another individual were promoters of the respondent-company, incorporated for cable manufacturing with an authorized capital of Rs. 1 crore. Initial shareholding details and director appointments were provided.

2. Company Operations and Financial Issues: Initially successful, the company faced financial troubles leading to manufacturing operations halting, factory dysfunction, and increasing interest burdens due to a mortgaged land. The petitioner's efforts to maintain statutory records and resolve disputes were allegedly ignored by the other directors.

3. Allegations and Disputes: The petitioner claimed denial of access to company records, factory, and functional role, leading to resignation attempts. Allegations of unauthorized shifting of company records and exclusion from company affairs were raised.

4. Petition for Winding Up: The petitioner filed a winding-up petition under section 433(f) citing continuous losses, erosion of capital, and obstruction by other directors in participating in company affairs as just and equitable grounds for winding up.

5. Legal Analysis and Precedents: The court considered the provisions of Sections 397-398 of the Companies Act and emphasized that winding-up should be a last resort, with preventive provisions against oppression and mismanagement to be exhausted first. Precedents and principles regarding premature winding-up petitions were cited to support the decision.

6. Dismissal of the Petition: The court found the petition premature and not maintainable at the admission stage, highlighting that the possibility of resolving directorial differences and reviving company operations existed, making winding up premature. The petition was dismissed along with the connected application.

This detailed analysis of the judgment highlights the key issues, legal arguments, factual background, and the court's decision regarding the petition seeking the winding up of the respondent-company under the Companies Act, 1956.